Unreported Decisions – October 2020
By Ajay R. Singh, Advocate
1. S. 68 r.w.s. 115BBE : Cash Credit – demonetization of currency – unaccounted sales only profit therefrom could only be taxed as income of assessee:
It is evident from entries found in cash book and from statement recorded from assessee in course of survey that assessee purchased gold in period of demonetization which was obviously for sale to persons on receiving cash from them as the same is normal practice of gold trade. The gold purchased in period of demonetization was towards agreed sale to persons on receiving amount there from those persons. Thus the source of payment for purchase of gold is out of amount received from its sales and so it is to be treated as properly explained. It is only profit on sale of said purchased gold which is income of assessee which was undisclosed income of assessee and the same could only be subjected to tax. It is settled law that in case of unaccounted sales only profit therefrom could only be taxed as income of assessee.
Nawal Kishore Soni vs. ACIT (ITAT Jaipur) dt: September 15, 2020; ITA No. 1307, 1308, & 1309/JP/2019; Assessment Years: 2015-16 to 2017-18
2. S. 56(2)(viib)/Rule 11UA: Fair market value of shares – assessee are free to adopt any one of the methods :
The appellant has challenged the addition of ` 3,96,54,531 u/s. 56(2)(viib) of the Act by the AO on account of issuance of shares on basis of Discounted Free Cash Flow Method instead of Net asset method.
Section 56 allows the assessees to adopt one of the methods of their choice. But, the AO held that the assessee should have adopted only one method for determining the value of the shares. In our opinion, it was beyond the jurisdiction of the AO to insist upon a particular system, especially the Act allows to choose one of the two methods. Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares, the assessee are free to adopt any one of the methods
Karmic Labs Pvt. Ltd. v/s. ITO, Ward-15(2) (1); ITA No. 3955/Mum/2018 Assessment Year: 2014-15; Mumbai ITAT; dt: 28/07/2020